Legal Movie Downloads Arrive

Hollywood took a big step towards its digital future earlier this week, when once-hobbled content aggregator Intertainer stunned the entertainment world by announcing a blockbuster deal with Microsoft to offer 70,000 hours of TV, films and animation directly to the public over the Internet.

The service requires at least 580 Kbps connectivity  a high requirement, but well within the range of business, DSL or high-speed cable modem services. Users must be in one of the top 35 markets, including New York or Boston, to use the service.

The quality of the movies and TV offered by Intertainer is remarkably high for Internet material. The site boasts relatively recent films like "The Mexican" and "Fifteen Minutes" and TV programming from major producers like A&E, ESPN, Warner Brothers and PBS.

The Intertainer system uses available technology from Microsoft, including servers, streaming components, players and digital rights management tools. CDN Speedera Networks handles distribution of the content, and Broadwing supplies the VPN technology and backbone services. Finally, Akamai provides the geographic targeting that the service uses to direct content at its markets.

Intertainer's market is expected to be relatively small to start, according to Jonathan Taplin, CEO at the company. He expects the service to have roughly 300,000 of approximately 21 million available users by the end of the year. Taplin argues that there are 10 million homes with broadband connections and another 11 million college students living in dorms with fast enough Ethernet connections to use the service. "I discount about half of that number for technical reasons," Taplin says. "Of the remaining 10 million we hope to have about 300,000 by the end of the year."

The service costs $7.99 a month for a basic package of TV and animation. Viewers can buy films for $3.99. Taplin expects to sell one film per month per user. There is also possible revenue from advertising and e-commerce. The site links to purchase options for items related to various shows. The company did not estimate such e-commerce revenues.

Neither Intertainer nor Microsoft would comment directly, but insiders said the move is a direct response to Justice Department investigations into antitrust behavior in the music industry. Industry watchers said the movie studios clearly did not want to end up with a long-term investigation on their hands. "Clearly they don't want to have the DoJ on their backs for ten years like the labels do," said Curt Marvis, CEO of CinemaNow, a rival online streaming service.

The Intertainer announcement also throws the relationship between the studios and cable companies into question. It has long been assumed that high-quality studio content available directly to cable customers via their modems would cut into the cable companies' own VoD plans. But Intertainer's Taplin disagrees. He says that, for now, the operators are viewing both businesses as opportunities.

Taplin says he offers the exact same filmed entertainment to Adelphia Communications on its direct cable system and as IP-based entertainment available via the Web. "Adelphia is seeing that it helps both sides of their business to offer films in this way," says Taplin. Adelphia did not return a call seeking comment.

Intertainer not only legitimizes the notion of offering content online, it also points to an important new attitude among content producers: that having several different online vendors, rather than one single source, will be the future of the business.

The movie studios will launch their own services in the near future, but there has been much speculation by analysts and competitors that they will attempt to control the entire market. "This definitely shows that the studios mean business about opening up the content to other players," says Lee Black, an analyst at Webnoize.

A multi-site content business market creates tantalizing options for network operators. If the public Internet is stocked with several such rich sites, then each would require hosting, bandwidth and other services, creating a potential boon for providers.

"There is no question that this would be a very different network world if that was the model," says Jim Stroud, an analyst at The Carmel Group.

Senior Writer
Jonathan Blum is currently the New York-based senior writer for The Net Economy where he covers next-generation broadband interactive audio and video, and specializes in venture funded companies. Prior to that he was Entertainment Technologies Editor/Equity Analyst at Technology Investor Magazine, a start-up printed consumer business publication with a circ. of 270,000. Jonathan has also contributed content to The Red Herring, PRWeek, Post and Digital Television.
Prior to that Jonathan was senior producer at CBS Cable,
a principle at Seneca Pictures, a writer/producer at CNBC,...
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